Income Tax Officer, Agar Malwa V. M/s Agrawal & Company, Agar Malwa

ITA 416/Ind/2018

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 4288 (ITAT-INDORE)
• Duration Of Justice: 3 year(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-05-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 03-03-2021
• Assessment Year: 2015-2016
• Appeal Filed On: 04-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: GIRISH AGRAWAL; MISS NISHA
• Section: 2; 143(3); 69B; 20

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE HONBLE MANISH BORAD, ACCOUNTANT MEMBER AND BEFORE HONBLE MADHUMITA ROY, JUDICIAL MEMBER ITA NO.416/IND/2018 ASSESSMENT YEAR 2015-16 INCOME TAX OFFICER, AGAR, MALWA : REVENUE V/S M/S. AGRAWAL & COMPANY, 27 BAROD ROAD, AGAR MALWA, M.P : ASSESSEE PAN : AADFA0269Q REVENUE BY SHRI HARSHIT BARI, SR.DR ASSESSEE BY SHRI GIRISH AGRAWAL & MISS NISHA LAHOTI, ARS DATE OF HEARING 05.04 .2021 DATE OF PRONOUNCEMENT 20 . 0 5 . 202 1 O R D E R PER MADHUMITA ROY, J.M THE INSTANT APPEAL FILED BY THE REVENUE IS DIRECTE D AGAINST THE ORDER DATED 21.02.2018 PASSED BY LD. CIT(A), UJJAIN (M.P) ARISING OUT OF THE ORDER DATED 29.12.2017 PASSED BY THE ITO -AGAR MALWA AGRAWAL & COMPANY ITA NO.416/IND/2018 2 U/S 143(3) OF THE INCOME TAX ACT 1961(HEREIN AFTER REFERRED TO AS ACT) FOR ASSESSMENT YEAR 2015-16. 2. THE BRIEF FACT RELATING TO THIS ISSUE IS THIS TH AT THE FIRM DERIVED INCOME FROM WHOLESALE TRADING OF GRAINS AND TRANSPO RT BUSINESS FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME A T RS.1,73,430/- ON 20.09.2015. THE ASSESSEE HAD AVAILED CASH CREDIT LI MIT FROM STATE BANK OF INDIA, AGAR, MALWA AGAINST HYPOTHECATION OF STOCK. THE ASSESSEE MAINTAINED BOOKS OF ACCOUNTS MANUALLY AND ALL THE INFORMATION SUBMITTED TO KRISHI UPAJ MANDI SAMITI, AGAR MALWA/BANK/ SALES TAX DEPARTMENT/INCOME TAX DEPARTM ENT AS WELL AS TO THE AUDITORS REGARDING VALUE AND QUANTIT Y OF PURCHASE, SALES AND CLOSING STOCK, EXCESS/SHORTAGE BASED ON T HE LEDGER CUM STOCK REGISTER OF GOODS. HOWEVER THE LD. A.O MADE THE ADDITION OF RS.2,14,89,267/- U/S 69/115BBE OF THE ACT AS AN UNE XPLAINED MONEY ON THE BASIS OF DIFFERENCE IN STOCK STATEMEN T SUBMITTED TO THE LENDER BANK AND KRISHI UPAJ MANDI SAMITI, AGAR MALWA. ASSESSEE FINALLY SUCCEEDED IN APPEAL BEFORE LD. CIT (A) WHEN THE ADDITION ULTIMATELY GOT DELETED. HENCE THE INSTANT APPEAL IS BEFORE US. AGRAWAL & COMPANY ITA NO.416/IND/2018 3 3. WE HAVE HEARD THE RELEVANT SUBMISSIONS MADE BY T HE RESPECTIVE PARTIES. WE HAVE ALSO PERUSED THE RELEV ANT MATERIALS AVAILABLE ON RECORDS. THIS CASE OF THE APPELLANT I S THAT THE ADDITION MADE BY THE LD. A.O IS NOT JUSTIFIED. THE RESULT R EFLECTED IN THE BOOKS OF ACCOUNTS OR STOCK SHOWN IN THE BOOKS OF AC COUNTS HAS NOT BEEN CONSIDERED IN ITS PROPER PERSPECTIVE BY THE LD . A.O. THE LD. A.O HAD TAKEN THE FOLLOWING DIFFERENCE IN STOCK STA TEMENT SUBMITTED TO THE BANK AS WELL AS TO THE KRISHI UPAJ MANDI SAM ITI, AGAR MALWA; CHART OF S.NO. DATE TOTAL DIFFERENCE OF STOCK AMOUNT 1 31.05.2014 5536054.00 2 30.09.2014 159 53213.37 TOTAL 21489267.37 4. IT IS THE FURTHER CASE OF THE ASSESSEE THAT THE APPELLANT IS MAINTAINING ALL THE BOOKS OF ACCOUNTS AND THESE BOO KS WERE AUDITED BY THE CHARTERED ACCOUNTANT WHERE NO ADVERSE COMMEN T WAS MADE FOR THAT QUANTITATIVE DETAILS AS MAINTAINED BY THE ASSESSEE. THE MAIN CONTENTION OF THE ASSESSEE IS THAT STOCK IN QU ANTITY AND THE VALUE REFLECTED ON ESTIMATED BASIS IN THE STATEMENT FURNISHED TO THE BANK AUTHORITIES WAS TO AVAIL HIGHER FINANCIAL CRED IT. MORESO, THIS AGRAWAL & COMPANY ITA NO.416/IND/2018 4 INFLATED AND ESTIMATED STOCK IS HYPOTHECATED AND NO T PLEDGED. APART FROM THAT, THE STATEMENT GIVEN TO THE BANK WA S ESTIMATED BASIS WITHOUT ANY ACTUAL PHYSICAL VERIFICATION AND THE SAME WAS NOT SUPPORTED BY THE BOOKS OF ACCOUNTS. ON THE OTHE R HAND THE QUANTITATIVE DETAIL OF GOODS TRADED BEING PART OF T HE AUDIT REPORT OF FORM NO.3CD FOR THE RELEVANT ASSESSMENT YEAR SHOW T HAT SUCH DETAILS ARE FULLY RECONCILED AND ARE TALLIED WITH T HE BOOKS OF ACCOUNTS. NO DISCREPANCY, HOWEVER, TO THE SALES, P URCHASE AND EXPENSES WAS FOUND BY THE TAX AUDITOR. NEITHER THE LD. A.O FOUND THESE BOOKS OF ACCOUNTS DEFECTIVE OR NON GENUINE. SUCH NEGATIVE VIEW IS NEITHER REFLECTED ON THE ACCOUNTS MAINTAINE D BY THE ASSESSEE IN REGARD TO THE KRISHI UPAJ MANDI SAMITI, AGAR MALWA AND THE COMMERCIAL TAX DEPARTMENT. FURTHER THAT THE AS SESSEE SUBMITTED STOCK STATEMENT TO THE MANDI ON FORTNIGHT LY BASIS AND ON MONTHLY BASIS TO THE BANK. DURING THE ASSESSMENT P ROCEEDING THE FOLLOWING EXPLANATION WAS MADE BY THE APPELLANT IN SUPPORT OF THE REASON FOR THE DIFFERENCE IN THESE TWO STOCK STATEM ENTS AS DIRECTED BY THE LD. A.O:- AGRAWAL & COMPANY ITA NO.416/IND/2018 5 SR. NO. DATE OF STOCK STATEMENT AMOUNT OF DIFFERENCE (RS.) REASON FOR DIFFERENCE REMARKS 1 31.05.2014 (PB 68) 55,46,054 STATEMENT SUBMITTED TO BANK IS DATED 12.06.2014 STATEMENT SUBMITTED TO KUMS IS DATED 31.05.2014 THUS, THE TWO STATEMENTS ARE NOT COMPARABLE. STATEMENT SUBMITTED TO BANK IS PREPARED CONSIDERING THE MARKET VALUE OF THE STOCK TO GET DRAWING POWER ON HIGHER LIMIT FROM BANK. ON THE OTHER HAND, STATEMENT SUBMITTED TO KUMS IS BASED ON COST (PAPER BOOK 57-58) ADDITION MADE BY LD. AO (AO PAGE 4, CHART 1 AND PB 168) 2 30.09.2014 (PB 69) 1,59,53,213 STATEMENT SUBMITTED TO KUMS AND BANK AT MANDI, THE WEIGHMENT CONTINUES TILL MIDNIGHT. HENCE IT IS NOT POSSIBLE TO SUBMIT TO BANK THE EXACT STOCK STATEMENT OF A PARTICULAR DATE. OWING TO THIS, THERE IS A DIFFERENCE IN STOCK SUBMITTED TO KUMS AND BANK (PB 58-59) ADDITION MADE BY LD. AO (AO PAGE 4, CHART 2 AND PB 168) 3 31.12.2014 (PB 70) 1,50 ,328 STATEMENT SUBMITTED TO KUMS AND BANK IN THE STATEMENT SUBMITTED TO KUMS, WEIGHT OF GRAM IS STATED AT 552.34 QUINTALS (QTLS) WHICH INCLUDES WEIGHT OF GRAM DOLLAR OF 33.60 QTLS. IN THE STATEMENT SUBMITTED TO BANK, WEIGHT OF GRAM AND GRAM DOLLAR ARE SEPARATELY MENTIONED AT 518.40 QTLS AND 33.60 QTLS RESPECTIVELY WHICH TOTALS TO 552 QTLS. DIFFERENCE IN WEIGHT OF MAIZE OF 1.08 QTLS IS DUE TO NO ADDITION MADE BY LD. A.O (PB 169 CHART-3) AGRAWAL & COMPANY ITA NO.416/IND/2018 6 MOISTURE AND DUST. THUS THERE IS NO DIFFERENCE IN THE TWO STOCK STATEMENTS (PB 58-59) 4 28.02.2015 (PB 71) 1,56,110 STATEMENT SUBMITTED TO BANK THIS DOCUMENT HAS TWO DATES, 11.03.2015 AND 28.02.2015. THUS, IT IS NOT CLEAR AS TO WHICH DATE THE STOCK POSITION RELATES. STATEMENT SUBMITTED TO KUMS THIS DOCUMENT IS DATED 28.02.2015. WEIGHT OF GRAM IS STATED AT 552.34 QUINTALS (QTLS) WHICH INCLUDES WEIGHT OF GRAM DOLLAR OF 33.60 QTLS. IN THE STATEMENT SUBMITTED TO BANK, WEIGHT OF GRAM AND GRAM DOLLAR ARE SEPARATELY MENTIONED AT 518.40 QTLS AND 33.60 QTLS RESPECTIVELY WHICH TOTALS TO 552 QTLS. DIFFERENCE IN WEIGHT OF WHEAT OF 4.97 QTLS IS DUE TO EXCESS WHICH HAS BEEN SHOWN IN THE YEARLY STATEMENT AT 14.15 QTLS. THUS THERE IS NO DIFFERENCE IN THE TWO STOCK STATEMENTS (PB 59-60, 18) NO ADDITION MADE BY LD. A.O (PB 169 CHART 4)AZ 5. THE LD. A.O IN FACT HAS ACCEPTED THE ABOVE EXPLA NATION FOR THE DIFFERENCE IN THE STATEMENT DATED 31.12.2014 AND 28 .02.2015. IT IS RELEVANT TO MENTION THAT THE PURCHASE AS WELL AS SA LES WERE AGRAWAL & COMPANY ITA NO.416/IND/2018 7 SUPPORTED BY VOUCHERS AND THE LD. A.O HAS NOT POINT ED OUT ANY DIFFERENCE OF SALES OR PURCHASES. IT APPEARS FROM THE RECORDS THAT THE ASSESSEE DULY EXPLAINED THE DIFFERENCE BETWEEN THE STOCK AS SUBMITTED TO THE MANDI AND TO THE BANK AS ON VARIOU S DATES VIZ, 31.005.2014, 30.09.2014, 31.12.2014 AND 28.02.2015 AS REFLECTED FROM PAGE 167 TO 169 OF THE PAPER BOOK FILED BEFORE US. UNDER THESE CIRCUMSTANCES THE QUESTION WOULD BE AS TO WHETHER T HE ADDITION ON ACCOUNT OF DIFFERENCE OF STOCK POSITION FOR CERTAIN DATES IN BETWEEN THE MONTHLY AND YEARLY STATEMENT IS JUSTIFIED WHEN THE YEAR ENDING STATEMENT OF THE MANDI RECONCILES WITH THE BOOK RES ULTS. IT APPEARS THAT THE STOCK AS PER THE BOOKS AND AS PER THE STAT EMENT GIVEN TO THE MANDI AS ON 31.03.2015 HAS BEEN DULY RECONCILED . THE BOOKS OF ACCOUNTS SEEMS TO HAVE BEEN MAINTAINED MONTHLY. DUR ING THE SEASON OF HEAVY ARRIVAL OF GOODS CERTAIN ENTRIES MA DE REMAIN TO BE INCLUDED IN THE LEDGER ACCOUNT DUE TO HUMAN ERROR W HICH ARE THEN CORRECTED IN THE NEXT FORTNIGHT OR IN THE ANNUAL ST ATEMENT SUBMITTED TO THE MANDI AS THE CASE MADE OUT BY THE ASSESSEE A LSO CANNOT BE BRUSHED ASIDE. IT IS RELEVANT TO MENTION THAT THE EXPLANATION RENDERED BY THE ASSESSEE ON THE DIFFERENCE DUE TO E XCESS/SHORTAGE AGRAWAL & COMPANY ITA NO.416/IND/2018 8 OF STOCK HAS BEEN DULY ACCEPTED BY THE LD. A.O. TH E ASSESSEES CONTENTION IS THAT THIS STOCK IN QUANTITY AND VALUE IS INFLATED ON ESTIMATED BASIS IN THE STATEMENT FURNISHED TO THE B ANK AUTHORITIES TO AVAIL HIGHER FINANCIAL CREDITS HAS BEEN SOUGHT T O BE SUPPORTED BY THE ASSESSEE BY RELYING UPON THE JUDGMENT PASSED BY HON'BLE HIGH COURT OF GUJARAT IN THE MATTER OF CIT V/S ARROW EXI M (P) LTD REPORTED IN (2010) 230 CTR (GUJ.) 293. 6. SINCE THERE WAS DIFFERENCE IN STOCK SUBMITTED TO THE LENDING BANK AND KRISHI UPAJ MANDI SAMITI, AGAR MALWA WIT H WHOM THE ASSESSEE HAS AVAILED CASH CREDIT LIMIT, THE LD. A.O MADE ADDITION OF RS.2,14,89,267/- U/S 69/115BBE. THE LD. A.O MADE ADDITION ON THE GROUND THAT THE APPELLANT HAS SHOWN MORE STOCK TO THE BANK AS HYPOTHECATED THAN IN THE BOOKS OF ACCOUNTS. 7. NEEDLESS TO MENTION THAT THE APPELLANT IS SUBJEC TED TO THE STATUTORY AUDIT UNDER THE VARIOUS ACT, 1961 AND EXC ISE ACT. NO DISCREPANCY WAS FOUND BY THE DEPARTMENT. IT IS THE SETTLED POSITION OF LAW THAT ADDITION CANNOT BE MADE U/S 69B OF THE ACT BASED ON STOCK SHOWN AND INFLATED QUANTITY/VALUE OF STOCK GI VEN TO BANK TO AVAIL HIGHER CREDIT FACILITIES. IF THE ADDITION MAD E WAS ALLOWED TO AGRAWAL & COMPANY ITA NO.416/IND/2018 9 CONTINUE, THE FINANCIAL STATEMENT WOULD GET COMPLET ELY DISTORTED. SUCH AN ADDITION ON ACCOUNT OF DIFFERENCE IN STOCK CAN ONLY BE MADE ON ADEQUATE MATERIAL WHICH ADMITTEDLY WAS FILE D TO BE RELIED UPON BY THE LEARNED ASSESSING OFFICER. 8. WE HAVE FURTHER CONSIDERED THE ORDER PASSED BY L D. CIT(A), THE RELEVANT PORTION WHEREOF IS AS FOLLOWS:- ANY ADDITION ON ACCOUNT OF DIFFERENCE IN STOCK CAN BE M ADE ONLY ON ADEQUATE MATERIALS, BUT NOT ARBITRARILY. THERE WAS A DIFFERENCE BETWEEN THE VALUE OF CLOSING STOCK DECLARED TO THE BANK AND TO THE INCOME TAX AUTHORITIES. THERE IS NO DISPUTE THAT THE APPELLANT WAS MAINTAINING BOOKS OF ACCOUNT ON DAY TO DAY TRADING. THE APPELLANT IN THE PRESENT CASE, HAS TAKEN THE ACTUAL PHYSICAL STOCK FOR THE PURPOSE OF DECLARING CLOSING STOCK TO THE INCOME-TAX AUTHORITIES. FURTHER THE PURCHASE AND SALES WERE SUPPORTED BY VOUCHERS AND THE ASSESSING OFFICER HAD NOT POINTED OUT ANY SUPPRESSION OF SALES OR PURCHASES. THE STATEMENT GI VEN TO THE BANK WAS ON ESTIMATE BASIS WITHOUT ANY ACTUAL PHYSICAL VERIF ICATION AND THE SAME WAS NOT SUPPORTED BY BOOKS OF ACCOUNT. THERE IS EVI DENCE TO SHOW THAT STOCK DECLARED TO THE INCOME TAX DEPARTMENT WAS SUP PORTED BY BOOKS OF ACCOUNT. NO DETAILED INVENTORY WAS ALSO AVAILABLE I N THE STATEMENT MADE TO THE BANK. EXCEPT A MERE VALUE DECLARED FOR OVERD RAFT PURPOSE TO THE BANK, THERE WERE NO DETAILS ITEMS OF STOCK IN SUPPO RT OF THE DECLARED VALUE. AGRAWAL & COMPANY ITA NO.416/IND/2018 10 IT WAS ALSO POINTED OUT THAT THERE WAS NO PHYSICAL VERIFICATION OF STOCK, EITHER BY THE APPELLANT OR THE BANK AT THE TIME OF FURNISHING THE STOCK STATEMENT. THE APPELLANT DECLARED CLOSING STOCK FOR ASSESSMENT PURPOSE WHICH IS BASED ON ACTUAL PHYSICAL VERIFICATION. THE RE WAS ENOUGH MATERIAL AVAILABLE ON RECORD AND THE CONCLUSION REACHED BY T HE AO IS BASED ON WITHOUT VALID MATERIALS AND EVIDENCE. IN VIEW OF TH E SAME, THERE IS NO BASIS TO TREAT THE DIFFERENCE IN VALUE AS THE APPEL LANT UNDER VALUATION OF STOCK AS UNDISCLOSED INCOME. THE SAME PRINCIPAL HAS BEEN FOLLOWED BY FOLLOWING JUDICIAL AUTHORITIES. 1. CIT VS. SRI PADMAVATHY COTTON MILLS LTD '236 ITR 340. 2. COMMISSIONER OF INCOME TAX VS. ARROW EXIM (P) LTD. HIGH COURT OF GUJARAT (2010) 230 CTR (GUJ) 293: 3. COMMISSIONER OF INCOME TAX VS. RIDDHI STEEL & TUBES (P) LTD.HIGH COURT OF GUJARAT SOURCE (2014) 220 TAXMAN 148 (GUJ). 4. COMMISSIONER OF INCOME TAX VS. RELAXO FOOTWEAR HIGH COURT OF RAJASTHAN (2003) 259 ITR 744 (RAJ.) 5. COMMISSIONER OF INCOME TAX VS. SAHIB SANKAR DAS HIG H COURT OF CALCUTTA SOURCE (2017) 396 ITR NO.215 OF 2016. 6. COMMISSIONER OF INCOME TAX V. MS. APCOM COMPUTER (P) LTD. MAD RAS HIGH COURT. 7. INCOME T AX OFFICER VS. MAPINPUBLISHING (P) LTD. IT AT AHMEDABAD 'A' BENCH (2004) 23 CCH 0504 AHD TRIB. IN VIEW OF ABOVE JUDICIAL PRONOUNCEMENT THE AO IS N OT JUSTIFIED IN MAKING THE ADDITION. THEREFORE, THE ADDITION MADE BY THE A O AMOUNTING TO RS.2,14,89,267/- IS DELETED . THEREFORE, THE APPEAL ON THIS GROUND IS AGRAWAL & COMPANY ITA NO.416/IND/2018 11 ALLOWED . 8. WE HAVE ALSO CONSIDERED THE ORDER PASSED BY HON 'BLE HIGH COURT OF GUJARAT AS RELIED UPON BY THE LD. AR IN TH E CASE OF CIT V/S ARROW EXIM (P) LTD (SUPRA) WHERE THE STOCK HYPOTHECATED WITH BANK VALUED HIGHER THAN SHOWN IN THE BOOKS OF ACCOUNTS. WHEN NO DEFECT IS FOUND WITH THE ACCOUNTS OF THE ASSESSEE E XPLANATION RENDERED BY THE ASSESSEE THAT THE INFLATED STATEMEN T WAS GIVEN TO THE BANK TO AVAIL HIGHER CREDIT IS TO BE CONSIDERED IN ITS PROPER PERSPECTIVE, NO INTERFERENCE IN DELETING SUCH ADDIT ION EITHER BY LD. CIT(A) OR BY THE TRIBUNAL IS CALLED FOR AS OF THE OBSERVATION OF THE HON'BLE COURT. THUS, TAKING INTO CONSIDERATION THE ENTIRE ASPECT OF THE MATTER, PARTICULARLY THE EXPLANATION RENDERED BY TH E APPELLANT IN SUPPORT OF THE ACCOUNTS MAINTAINED BY THE ASSESSEE FOR INFLATED STATEMENT SUBMITTED TO THE BANK TO AVAIL HIGHER CRE DIT, WE FIND NO JUSTIFICATION IN THE ORDER PASSED BY LD. CIT(A) IN DELETING SUCH ADDITION MADE BY THE LD. A.O ON ACCOUNT OF UNEXPLAI NED INVESTMENT WITHOUT ANY AMBIGUITY SO AS TO WARRANT INTERFERENCE . HENCE WE FIND AGRAWAL & COMPANY ITA NO.416/IND/2018 12 NO MERIT IN THE APPEAL PREFERRED BY REVENUE AND THE SAME IS, THUS, HEREBY DISMISSED. 10. IN THE RESULT APPEAL OF THE REVENUE IS DISMISS ED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 20.05.2021 SD/- SD/- (MANISH BORAD) (MADHUMITA ROY) ACCOUNTANT MEMBER JUDICIAL MEMBER / DATED : 20 TH MAY, 2021 /DEV COPY TO: THE APPELLANT/RESPONDENT/CIT CONCERNED/CIT (A) CONCERNED/ DR, ITAT, INDORE/GUARD FILE. BY ORDER, ASSTT.REGISTRAR, I.T.A.T., INDORE